Are higher rates slowing your Hollis sale or stretching your monthly budget in the Boston suburbs? You are not alone. Many buyers and sellers across southern New Hampshire and Cambridge–Newton–Framingham are weighing two tools to bridge the gap: a seller-funded mortgage rate buydown or a straight price drop. In a few minutes, you will see how each option works, what it means for your payment or proceeds, and when one tends to outperform the other in local deals. Let’s dive in.
Rate buydown vs price drop
A rate buydown reduces the buyer’s mortgage interest rate by paying a fee at closing. The fee can be paid by the buyer, seller, or lender. You will see two common types:
- Temporary buydown: A 2-1 or 3-2-1 structure lowers the interest rate for the first one to three years, then it returns to the original note rate. Sellers often fund this with a one-time escrow deposit at closing.
- Permanent buydown: Discount points are paid at closing to lower the interest rate for the life of the loan. Points are typically quoted as a percentage of the loan amount.
A price drop is a reduction in the listed or negotiated sale price. It permanently lowers the buyer’s purchase price and loan amount and directly reduces the seller’s gross proceeds.
Both strategies can lower a buyer’s monthly payment. The key differences are how they affect recorded comps, qualification, and the seller’s net.
Why it matters locally
In Hollis and the Cambridge–Newton–Framingham corridor, many buyers finance their purchase and focus on monthly affordability. A buydown can make early payments feel more manageable while keeping the recorded sale price intact. That can help preserve neighborhood comps and support nearby values. A price drop, on the other hand, sends a clear signal to the market and may help more with loan qualification and appraisal risk in softer conditions.
Because market conditions shift month to month, it is smart to check current inventory, days on market, and sold price-to-list price trends before choosing a tactic. Your lender’s buydown pricing and underwriting policy also matter.
A clear, side-by-side example
Below is a simple comparison using a hypothetical Hollis-area home. This is for illustration only. Exact costs and savings depend on your lender’s pricing and the loan program.
Assumptions:
- Price: $700,000
- Down payment: 20%
- Loan: $560,000
- Mortgage: 30-year fixed, 7.00% note rate
- Buyer-paid taxes and insurance are not included below. We are showing principal and interest only.
Scenarios compared:
- Baseline: No concession
- Price drop: 3% price reduction
- Temporary buydown: Seller-paid 2-1 buydown
- Permanent buydown: Seller pays about 2 points to lower rate by roughly 0.50% (illustrative only; lender quotes vary)
| Scenario | Recorded sale price | Loan amount | Monthly P&I | Buyer monthly savings | Seller cost at closing |
|---|---|---|---|---|---|
| Baseline | $700,000 | $560,000 | ~$3,727 | — | $0 |
| Price drop 3% | $679,000 | $543,200 | ~$3,615 | ~$112 | $21,000 price reduction |
| 2-1 buydown | $700,000 | $560,000 | Yr 1 ~ $3,005, Yr 2 ~ $3,358, Yr 3+ ~ $3,727 | Yr 1 ~$722, Yr 2 ~$369 | ~ $13,100 buydown deposit |
| Permanent buydown | $700,000 | $560,000 | ~ $3,541 at ~6.50% | ~$186 | ~ $11,200 for points |
What this means:
- The 2-1 buydown delivers the largest early payment relief with a smaller seller cost than a 3% price drop, and it keeps the sale price intact. The buyer’s payment steps up in year two and then returns to the note rate in year three.
- The permanent buydown lowers the payment for the full term. In this illustration, a seller concession of about $11,200 creates a monthly savings similar to a roughly $35,000 price reduction. Actual point-to-rate value will vary by lender and day.
- The price drop reduces the buyer’s loan amount and payment permanently. It is simple and visible to the market but lowers the recorded sale price and seller proceeds dollar-for-dollar.
Underwriting, comps, and taxes
- Qualification: A permanent buydown usually affects the note rate used in qualifying. Temporary buydowns may not help with qualification if the lender underwrites to the note rate. Ask your lender how they will qualify the loan and what documentation they require for a seller-funded buydown.
- Appraisal and comps: A price drop lowers the recorded sale price and can influence future comparable sales. A buydown keeps the recorded sale price the same, which some sellers prefer to support neighborhood values.
- Seller concession limits: Conventional, FHA, VA, and USDA loans have different caps on seller-paid concessions. Confirm the allowable amount for your specific loan program.
- Tax treatment: Seller-paid buydowns are typically treated as a concession that reduces cash proceeds but not the recorded sale price. Mortgage points may be deductible under certain IRS rules when they are bona fide points. Tax outcomes depend on your situation, so involve a tax professional.
- Advertising and disclosure: If you advertise payments that rely on a buydown or unusual credits, make sure your marketing complies with Truth in Lending Act rules and local MLS policies. Disclose the buydown structure and funding source in the contract and to the lender.
When each option fits
Consider a seller-funded buydown if:
- You want to preserve recorded sale price and support comps.
- The buyer can qualify at or near the note rate, but monthly payment is the sticking point.
- You are in a neutral or mildly competitive market and need to boost perceived affordability without cutting price.
- The buyer expects income growth or plans to refinance within a few years, making a 2-1 buydown attractive.
Consider a price drop if:
- Inventory is higher and days on market are stretching. A price change sends a clear message and can re-engage buyers.
- The buyer is tight on debt-to-income ratios. Lowering the price reduces the loan amount and can more reliably improve qualification than a temporary buydown.
- You want to reduce appraisal risk by bringing the recorded sale price in line with comps.
- You need a simple, fast lever that is easy for the market to understand.
A quick way to compare options
To gauge whether a buydown or price cut is more efficient for your situation, use this simple approach:
- Get the baseline monthly payment from the lender at the current note rate and list price.
- Price drop test: Ask your agent to model a realistic price reduction and show the buyer’s new monthly payment and the seller’s net.
- Buydown test: Ask the lender for pricing on a 2-1 buydown and a permanent buydown. Get the exact cost and the resulting monthly payments.
- Match the monthly savings: Find the price reduction that would produce the same monthly savings as the buydown. Compare the seller’s cost for each path.
- Check underwriting: Confirm with the lender whether the temporary or permanent buydown will be used for qualification.
Seller checklist
- Gather current local metrics: inventory, days on market, and sold price-to-list price ratios.
- Get lender quotes for both temporary and permanent buydowns, including exact costs and documentation.
- Build a side-by-side worksheet: baseline, price drop, 2-1 buydown, permanent buydown. Include seller net, buyer cash to close, and buyer monthly payment.
- Confirm concession limits for the likely loan program and coordinate escrow handling with the title or closing agent.
- Review tax implications with your tax professional.
- Ensure your MLS remarks and any payment examples meet TILA and MLS guidelines.
Buyer checklist
- Ask your lender whether a temporary or permanent buydown will help you qualify. Get the answer in writing if possible.
- Compare timelines: How long do you expect to keep the loan, and do you anticipate a refinance window?
- Choose structure: Decide whether a larger early discount or a smaller lifelong discount fits your plans.
- Clarify documentation: Confirm how the buydown will appear on your Loan Estimate and Closing Disclosure and how the escrow will work.
Putting it to work in Hollis and the Boston suburbs
In many Hollis, Cambridge, Newton, and Framingham deals, you can use a seller-funded buydown to widen your buyer pool without changing the recorded price. In a softer week or when qualification is tight, a price adjustment might be the cleanest path to a signed contract. The best answer depends on your property, your buyer profile, and your lender’s current pricing.
If you want a numbers-first plan for your address, we will build a custom side-by-side with live lender quotes and local comps so you can choose with confidence.
Ready to see which move creates the greatest impact for your sale or purchase? Reach out to the team at Christensen Group, Inc. for a tailored comparison and next steps.
FAQs
How does a seller-paid buydown affect loan qualification?
- Lenders may underwrite to the note rate, especially for temporary buydowns. A permanent buydown often affects the rate used for qualifying. Confirm the policy with your lender.
Does a buydown change the recorded sale price in Hollis or Cambridge–Newton–Framingham?
- No. A buydown is a concession paid at closing, so the recorded sale price stays the same. A price drop changes the recorded sale price.
Which costs a seller more in practice, a $10,000 price cut or a $10,000 buydown?
- Both reduce the seller’s proceeds by $10,000. The difference is in market signaling and how the recorded sale price impacts comps and perception.
Can a price drop reduce appraisal risk in southern New Hampshire or Boston suburbs?
- It can. Lowering the price may help align with comps and reduce the chance of an appraisal shortfall. A buydown does not change the recorded sale price.
Are buydowns common right now in Hollis and the surrounding MA markets?
- Usage varies with inventory and rates. In tighter markets, sellers may prefer buydowns to preserve price. In softer conditions, price adjustments are more common.
Are there limits on how much a seller can contribute toward a buydown?
- Yes. Seller contribution limits depend on the loan program, such as conventional, FHA, VA, or USDA. Your lender can confirm the allowable amount for your scenario.
